WASHINGTON — In a sign of the continuing resurgence of the nation's economy, manufacturing plants were busier for a third straight month in December, a key industry group reported Monday. White House officials predicted the strengthening economy will create 2 million jobs this year.
The National Assn. of Purchasing Management said its December index climbed to 57.9 from 55.9 in November as 13 out of 20 industries reported stronger business. Prices fell and job prospects brightened, the industry group said.
"Continuing growth in new orders, combined with low inventories and generally decreasing prices, will enable December to usher out 1993 with the highest rate of economic growth since January, 1993," said Robert Bretz, chairman of the association's business survey committee.
All the evidence of a strong closing quarter, with economic growth exceeding 4%, led Labor Secretary Robert B. Reich to forecast a drop in the unemployment rate this year.
Jobs lagged during the slow but steady recovery from the 1990-91 recession, partly because companies concentrated on boosting efficiency by trimming work forces and squeezing more from current employees rather than hiring.
That was reflected during 1993 in rising overtime hours, while the national unemployment rate slowly nudged down from 7.1% a year ago to 6.4% now.
But Reich said he expects 2 million jobs will be created in 1994 and that unemployment will drop further. The December jobless rate is scheduled to be issued Friday, and economists surveyed by Reuters forecast that 215,000 jobs will be added.
"On the basis of the early indications, unemployment should be down, I would say, probably in the range of 6% to 6.4%," Reich said on ABC television's "Good Morning America." Another upbeat prediction came from Deputy Treasury Secretary Roger Altman, in a separate interview on NBC's "Today" show. He said interest rates will be "relatively subdued" in 1994 while the economy grows at a 3% annual rate.
Low interest rates spurred a second-half economic bounce in 1993, especially in the housing and auto sectors. Altman pointed out that, after accounting for inflation, rates are the lowest in 20 or 30 years, "and that can't continue forever."
"But there's no basis, either in meaningfully higher inflation or in much greater credit demand, to expect that interest rates would rise in a sustained way this year," Altman said.
"We expect that interest rates will stay in a relatively subdued fashion in 1994," he said.
The stimulative impact of low interest rates was apparent in a separate Commerce Department report Monday on November construction spending, which posted a seventh successive monthly rise.
Total construction spending increased 1.8% to a seasonally adjusted annual rate of $497.7 billion, after gaining 2.5% in October.
Spending grew in every month of 1993 except April, when it fell 1.2%, as homeowners refinanced at cheaper rates and added to their household incomes while new-home buyers rushed into the market at a growing pace before rates rise.
Leading the November gain was a 3.3% pickup in spending on residential construction to a seasonally adjusted annual rate of $221.8 billion. Both single-family home building and construction of apartments grew from October.
"The housing sector continues to look very strong," economist Lynn Reaser of First Interstate Bancorp in Los Angeles said. "It's an area of strength for the entire economy."
Reaser noted that the purchasing managers report for November includes a gain in its employment index to 49.2 from 46.1. An employment index above 48, over time, is generally consistent with an increase in the Bureau of Labor Statistics data on manufacturing employment.
"The report looks very solid," Reaser said. "Manufacturing struggled at midyear last year, but it is certainly starting 1994 on a strong foot."
Purchasing Managers Index, AP / Los Angeles Times The index tracks overall business activity of more than 300 industrial companies. Dec. '92: 55.4%, Dec '93: 57.9% Source: National Assn. of Purchasing Management